Working Papers

We use a new data set that tracks U.S. firms from their birth over two decades to understand the life cycle dynamics and outcomes (both successes and failures) of VC- and non-VC financed firms. We first ask to what market-wide and firm-level characteristics venture capitalists respond in choosing to make their investments and how this differs for firms financed solely by non-VC sources of entrepreneurial capital. We then ask what are the eventual differences in outcomes for firms that receive VC financing relative to non-VC-financed firms. Our findings suggest that VCs follow public market signals similar to other investors and typically invest largely in young firms, with potential for large scale being an important criterion. The main way that VC financed firms differ from matched no...